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03. August 2012 
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Jones Lang LaSalle’s 2Q profit down 15%
Second-quarter profit of Chicago-based real estate service firm Jones Lang La Salle (JLL) dropped 15% due to restructuring costs, more employees and higher variable salary components. Profit for the quarter came in at US$37.4mln (83c per share) on revenues of US$921mln, down from $44.1mln last year (99c per share). Market consensus had expected a profit of US$1.26 on revenues of US$933mln.
Both revenue and operational costs rose 9% for the quarter but non-recurring restructuring costs of US$17mln ate into profits. Restructuring costs mainly stemmed from the acquisition of UK real estate firm King Sturge that had been completed in May. In order to integrate the British company, JLL had to combine office space in several EMEA locations, which led to the premature cancelling of rental contracts. Moreover, amortization of intangible assets that occurred in course of the takeover amounted to US$2mln.
Operating revenue rose in the Americas and the EMEA region but fell in Asia/Pacific. The latter effect was due to a lower transaction level in the region as well as a relatively high comparison base in the hotels business in 2011.
Higher operational costs were largely attributable to a risen number of employees – mainly due to the King Sturge integration [we reported] – as well as risen bonus payments in the transaction business. As JLL had previously announced to discontinue its stock-option program for employees, additional costs of US$4mln accrued.
At a glance - EMEA Real Estate Services
EMEA’s revenue in the second quarter of 2012 was $249 million, an increase of 14 percent, 24 percent in local currency, and revenue growth on a fee revenue basis was 23 percent in local currency. Leasing and Capital Markets & Hotels revenues were up 20 percent and 39 percent in local currency, respectively, and all service lines benefited from the successful King Sturge merger. On a country basis, there was strong revenue growth from the UK, Germany and Russia compared with the second quarter of 2011. Year-to-date fee revenue was $409 million, an increase of 19 percent, 26 percent in local currency.
Operating expenses, which include $2 million of King Sturge intangibles amortization, were $236 million for the second quarter, an increase of 12 percent from the prior year, 20 percent in local currency. Operating expenses also include nearly $4 million of additional gross contract costs related to the PDS business line compared with the second quarter of 2011. Fee-based operating expenses increased 11 percent over the second quarter of 2011, 19 percent in local currency. The year-overyear increase was primarily due to increased compensation and operating costs after last year’s merger. On a fee revenue basis, EMEA’s adjusted operating income margin, which excludes the King Sturge intangibles amortization, was 6.6 percent in the second quarter compared with 4.1 percent in 2011.
EBITDA was $19 million, compared with $12 million in the second quarter of 2011. EBITDA margin calculated on a fee revenue basis was 8.4 percent for the second quarter compared with 6.2 percent for the second quarter last year.
Year-to-date fee-based operating expenses were $407 million, compared with $349 million in 2011. Included in operating expenses was $4 million of intangibles amortization compared with $2 million in the first six months of 2011. Adjusting for the intangibles amortization related to the merger, operating income margin calculated on a fee revenue basis was 1.5 percent, compared with an operating loss of 1.5 percent in 2011.
EBITDA for the first six months was $14 million, compared with $4 million in 2011. EBITDA margin for this period calculated on a fee revenue basis was 3.5 percent, compared with 1.1 percent in the first half of 2011.
Both revenue and operational costs rose 9% for the quarter but non-recurring restructuring costs of US$17mln ate into profits. Restructuring costs mainly stemmed from the acquisition of UK real estate firm King Sturge that had been completed in May. In order to integrate the British company, JLL had to combine office space in several EMEA locations, which led to the premature cancelling of rental contracts. Moreover, amortization of intangible assets that occurred in course of the takeover amounted to US$2mln.
Operating revenue rose in the Americas and the EMEA region but fell in Asia/Pacific. The latter effect was due to a lower transaction level in the region as well as a relatively high comparison base in the hotels business in 2011.
Higher operational costs were largely attributable to a risen number of employees – mainly due to the King Sturge integration [we reported] – as well as risen bonus payments in the transaction business. As JLL had previously announced to discontinue its stock-option program for employees, additional costs of US$4mln accrued.
At a glance - EMEA Real Estate Services
EMEA’s revenue in the second quarter of 2012 was $249 million, an increase of 14 percent, 24 percent in local currency, and revenue growth on a fee revenue basis was 23 percent in local currency. Leasing and Capital Markets & Hotels revenues were up 20 percent and 39 percent in local currency, respectively, and all service lines benefited from the successful King Sturge merger. On a country basis, there was strong revenue growth from the UK, Germany and Russia compared with the second quarter of 2011. Year-to-date fee revenue was $409 million, an increase of 19 percent, 26 percent in local currency.
Operating expenses, which include $2 million of King Sturge intangibles amortization, were $236 million for the second quarter, an increase of 12 percent from the prior year, 20 percent in local currency. Operating expenses also include nearly $4 million of additional gross contract costs related to the PDS business line compared with the second quarter of 2011. Fee-based operating expenses increased 11 percent over the second quarter of 2011, 19 percent in local currency. The year-overyear increase was primarily due to increased compensation and operating costs after last year’s merger. On a fee revenue basis, EMEA’s adjusted operating income margin, which excludes the King Sturge intangibles amortization, was 6.6 percent in the second quarter compared with 4.1 percent in 2011.
EBITDA was $19 million, compared with $12 million in the second quarter of 2011. EBITDA margin calculated on a fee revenue basis was 8.4 percent for the second quarter compared with 6.2 percent for the second quarter last year.
Year-to-date fee-based operating expenses were $407 million, compared with $349 million in 2011. Included in operating expenses was $4 million of intangibles amortization compared with $2 million in the first six months of 2011. Adjusting for the intangibles amortization related to the merger, operating income margin calculated on a fee revenue basis was 1.5 percent, compared with an operating loss of 1.5 percent in 2011.
EBITDA for the first six months was $14 million, compared with $4 million in 2011. EBITDA margin for this period calculated on a fee revenue basis was 3.5 percent, compared with 1.1 percent in the first half of 2011.
